I interact with non-technical people almost every day, and I can relate that this is a concern that they have been far more vocal about lately. I don't really understand how it became a concern, since I'd expect that they don't follow startup news like I do, nor do they tend to be early adopters that would have been burned by a service closing.
Every single of the half-dozen or so times that I've recommended Quickbooks Online to someone, their major objection has been that they don't want to rely on it because they're concerned that Quickbooks will just up and cancel it one day. (Or break it.) Just a few days ago, one of my clients asked my opinion of online backup services, especially Carbonite. Her first question was what she would do if they didn't stick around. She's a pretty sharp individual, but not tech-savvy, and even though I explained that in that case she could just sign up for a different service, she still decided it was too risky to rely on.
For me, after reading HN for a while now, I've gotten a toin coss mentality towards whether or not a particular startup will still be around in a year.
My hunch is that several classes of web-based startups are headed for trouble and don't realize it yet. If you're building a game, if you're building a Facebook app, if you're building something that people don't feel like they have to rely on, you're fine. But, if you're trying to address a major business problem or build something that people will have to trust for the long term, I think your pool of available customers is shrinking, not growing.
The funny thing is that what the customers want is lifestyle businesses -- businesses that the founders are totally invested in and wanting to work on for a very long time -- and lifestyle businesses catch a lot of derision in startup circles.
Excellent points. Interesting to note that most startup businesses that go through traditional investor route exit via acquisitions or getting acquired to get returns for investors (or IPO).
I had this conversation with an angel investor with our team, when we said we are interested in staying in business for a long time and build our user base & let them speak for us. The investor said you need to take a call whether you want a 'lifestyle' business or you want to take the other route to build scale fast. Haven't heard from him yet. :) We were not convinced that we should throw lot of advertisement money, get lot of eyeballs, convert 1 or 2% into sales & just grow.
So, the question is: what kind of commitment can we give to our customers to assure them that a B2B business here is to stay & serve them. The purpose is to "exist" not to get acquired.
Would love to hear examples & stories of businesses that have managed to do the balancing act.
For 'serious software' that is doing business, the first thing I now check is Plans and Pricing. if there is none, it is almost a guarantee I will not be using it seriously.
I will confess though, it was not always like this. I was once of the people that Googled "Free Basecamp Alternatives" but all that changed when I started understanding "if software owners do not make money, how can they survive?!"
We caused it by making people believe "delivering bits cost nothing" forgetting that money was needed to pay the bills. Of course I still believe services should have a free tier to allow non-power users test a service. But that in itself is pricing strategy which has the word 'pricing' in it.
A product/service that has a business model does not mean it will shut down but one that does not will certainly shut down.
Things things are turning around. The 37 Signal guys should get some sort of recognition for being in the front of this struggle.
Same here. And it annoys the hell out of me when there's none in sight. I actually avoid apps which start their copy with the word "free".
forgetting that money was needed to pay the bills.
And keeping the team motivated, let's not forget that. I understand why a startup with big funding can afford to give away their service as a land grab move, but two-man teams and solo founders with no cash in the bank? Often as not, they're gone in a couple of months.
I am generally wary of any company that isn't using a business model predicated on customers paying for a service.
If the business model is "Attract lots of people and then sell ads." then the service will be oriented towards whatever provides the most clicks.
If the business model is "Get big, and then get bought out." then the service will quite possibly vanish.
For throwaway services that I can switch to a new provider for, this is possibly acceptable. But for anything I might want to base my own business on, or store information I will care about in the future, doing so would be foolhardy.
I'll second this. It doesn't mean that these others can't exist (Foursquare is a big example), but there seems to be a valley of death for these types. Either go massively big or fail.
At least with a pay for use pricing scheme a company can do well and grow slowly without having to hit that massive knockout.
As an entrepreneur, this is why I favor starting B2B businesses. Sure, I would love to create the next Internet/social phenomenon like YouTube, but those markets are largely winner take all.
In B2B, you can be #2, #5, #10 or even higher and still have a successful business. Back in the 90s I worked with an email marketing company that scaled way too fast. The thinking was "get big or go home." Even as it cratered during the dot-com crash, small players were emerging all the time, and many of them are thriving today.
Typically in a B2C business, users don't care much to know how long you have existed or how long you will exist. If you shut shop, they switch to using another free service.
But that's not the case in B2B. I do agree that B2B is more lucrative. But, how do you convey to your potential customers that your service is here to stay. Businesses are not comfortable moving from one service to another. And, with so many start ups dying fast or pivoting fast, what's the best way for a service to build trust with its potential customers?
But even bigger, succesful companies can be acquired and disappear forever. I don't think its any guarantee of stability that they are charging money for service, not any more. Heck, Verizon may buy Netflix, then what?
DEC went through a long and complicated dismantling during the 90s. In the late 90s, Intel did eventually end up, through two different transactions, with most of the chip IP and fabs, including the StrongARM and the Alpha. StrongARM/XScale stayed relevant for a number of years, but the Alpha was already dead. There was little market for it, and the top guys had already left for AMD to design the Athlon.
Compaq eventually picked up what remained under the DEC name, which wasn't much.
What's left of DEC is scattered throughout the tech industry. What's left of their microprocessors is in Intel and AMD CPUs.
(By the way, one example wouldn't exactly prove whatever point you're trying to make. The pattern of paying a few million to a few tens of millions of dollars for a startup to shut down its existing operations would still be far more common/likely.)
Thanks for the suggestion. Yes. We are going to redo the about us page and mention that.
Also, my question was more around ways of signaling to your potential customers that you have a solid roadmap and plan/ability to make it big and sustainable and not sell out half way.
It is http://www.muziboo.com that we have been doing for over 4 years. It has about half a million users and we make good cash from ads + pro account. Happy to answer any more questions
'Plans & Pricing' is a very B2B expectation where customers come with the idea of paying for a service. In a B2C service users only come with the expectation of trying out a service and if they comfortable pay for premium services. So, we show this page only after a user creates an account.
Users can actually be put off seeing a 'Plans n pricing' page especially for a service like Muziboo.
I'm put off by the lack of a plans page, but there are so many apps which hide it that, yeah, I thought it might be on purpose. It's very interesting to learn your reasons, thanks for sharing!
By the way, how did you learn that users get put off by pricing pages? Was it from traffic data or user feedback (or just your gut instinct)?
User reaction. When we introduced our premium service (this we did with the consent of our power users) after almost one year of giving free service, many that joined new, wrote hate mails saying how everything in the internet should be free. That's when we decided this has to be subtle. The basic service is free. And, when a user clicks to share a track privately or choose higher bitrate streaming, we prompt him/her to upgrade cos those are some of the premium features in Muziboo.
After experiencing the service, users become comfortable and also know exactly why we are better than the lot of other free services.
In B2C subtlety in this matter helps. But you can't do that in B2B. Potential customers evaluate your service based on the pricing.
In short, it's another way to lower the barrier to entry. Well played.
From my experience with threddie I learned there are a great many people out there who behave like consumers in the way they go about discovering new apps but, because they're decision makers at their companies, they end up B2B customers.
I'm not sure I like the idea of B2B saas companies employing B2C tactics en masse, I fear it would make for a silly red-and-yellow landscape where everything is FREE FOREVER SIGN UP NOW. Price transparency is good for everybody and it helps move the market forward (material for a blog post right there).
Alas, I fear I'm going on an off-topic tangent here, though the subject is intriguing. Thanks a lot for sharing your insights in this matter. I might drop you an email later. Cheers!
I find it interesting that you bring up Balsamiq. It was my switch from Mockingbird to Balsamiq that triggered my weariness that AndrewDucker points out.
Free services are quite nice, and I make great use of them (Wave Accounting, and TeamLab for example) but I can't help to always wonder what their future is and if/when they'll spring the email on me announcing their free plans were just a customer acquisition strategy.
This is definitely a real concern with the SaaS model and one of the reasons big business has been reluctant to rely on it.
Source code escrow works really well to sell enterprise customers. Perhaps there should be something similar for SaaS companies. An agreement, paid for by the customer, that if the company fails or the service is no longer supported, the customer will be given the ability run it themselves.
Customers don't want to, and are not able to, operate a SAAS operation in house. That's why they go SAAS in the first place.
Here's a variation, though: The vendor should open source their core software and escrow some extensions (if they need an IP moat to stay in business), and license their technology to a reputatable small consultancies, something like Revolution Analytics (R language), Analytics Pros (Google Analytics) for use in resale/redploy
I found this to be the case when selling to any kind of medium to large business. One of the objections I repeatedly receive is that adopting a startup's product is risky because the startup may not be around in the next year.
Every single of the half-dozen or so times that I've recommended Quickbooks Online to someone, their major objection has been that they don't want to rely on it because they're concerned that Quickbooks will just up and cancel it one day. (Or break it.) Just a few days ago, one of my clients asked my opinion of online backup services, especially Carbonite. Her first question was what she would do if they didn't stick around. She's a pretty sharp individual, but not tech-savvy, and even though I explained that in that case she could just sign up for a different service, she still decided it was too risky to rely on.
For me, after reading HN for a while now, I've gotten a toin coss mentality towards whether or not a particular startup will still be around in a year.
My hunch is that several classes of web-based startups are headed for trouble and don't realize it yet. If you're building a game, if you're building a Facebook app, if you're building something that people don't feel like they have to rely on, you're fine. But, if you're trying to address a major business problem or build something that people will have to trust for the long term, I think your pool of available customers is shrinking, not growing.
The funny thing is that what the customers want is lifestyle businesses -- businesses that the founders are totally invested in and wanting to work on for a very long time -- and lifestyle businesses catch a lot of derision in startup circles.